Question 1

What is Step Up SIP?

Accepted Answer

Step Up SIP (or Top-up SIP) is a facility that allows you to increase your SIP amount periodically (usually annually) by a fixed percentage or amount. This helps you align your investments with your rising income.

Question 2

How does Step Up SIP help?

Accepted Answer

It helps you reach your financial goals faster and combat inflation. By increasing your investment as your salary grows, you can build a significantly larger corpus compared to a regular SIP.

Question 3

By how much should I increase my SIP?

Accepted Answer

A common recommendation is to increase your SIP by at least 10% every year, or in line with your annual salary increment. Even a small 5% annual increase can make a huge difference over 15-20 years.

Question 4

Can I stop the step-up facility later?

Accepted Answer

Yes, most mutual fund platforms allow you to modify or cancel the step-up instruction while continuing the base SIP, subject to the fund house's rules.

Question 5

Is Step Up SIP suitable for long-term goals?

Accepted Answer

Absolutely. It is ideal for long-term goals like retirement planning or child's education, where the cost of the goal increases over time due to inflation.

Question 6

What is the difference between Top-up SIP and Step-up SIP?

Accepted Answer

They are often used interchangeably. 'Top-up' usually refers to adding a fixed amount (e.g., ₹500 extra), while 'Step-up' often refers to a percentage increase (e.g., 10% extra). Both serve the same purpose.

Question 7

Can I decrease the step-up percentage later?

Accepted Answer

Yes, you can usually modify the step-up parameters (percentage or amount) through your investment platform or by submitting a request to the AMC.

Question 8

Is Step-up SIP automatic?

Accepted Answer

Yes, once you set the instruction (e.g., increase by 10% every year), the deduction amount will automatically increase on the specified date without manual intervention.

Question 9

Does Step-up SIP apply to existing SIPs?

Accepted Answer

For existing SIPs, you may need to start a new Top-up instruction or modify the existing mandate if the platform allows. It's easiest to set up while starting a new SIP.

Question 10

What is the maximum step-up limit?

Accepted Answer

There is usually no specific limit on the step-up amount, but it is limited by the maximum amount limit set in your bank mandate (OTM).

Question 11

How is the step-up amount calculated?

Accepted Answer

If you choose a 10% step-up on a ₹10,000 SIP, the SIP will be ₹10,000 in Year 1, ₹11,000 in Year 2, ₹12,100 in Year 3, and so on.

Question 12

Can I do a manual step-up instead of automatic?

Accepted Answer

Yes, you can simply start a new additional SIP every year to achieve the same effect. However, automatic step-up ensures discipline and removes the hassle of manual execution.

Question 13

Is Step-up SIP good for tax saving (ELSS)?

Accepted Answer

Yes, it works well for ELSS too. However, remember that each SIP installment in ELSS has a 3-year lock-in period.

Question 14

What happens if I don't have funds for the increased amount?

Accepted Answer

If the bank transaction fails, you might be charged a penalty. It's important to ensure your bank mandate limit and account balance can support the increased SIP amount.

Question 15

Does Step-up SIP increase risk?

Accepted Answer

It increases your exposure to the market, so the absolute risk increases, but the percentage risk remains the same as the underlying fund. It is a strategy for wealth accumulation, not risk management.

Question 16

Can I set a cap on the maximum SIP amount?

Accepted Answer

Yes, many platforms allow you to set a 'Cap Amount' or 'Ceiling Amount'. Once the SIP reaches this amount, the step-up stops, and the SIP continues at that capped amount.

Question 17

How does Step-up SIP affect Rupee Cost Averaging?

Accepted Answer

It enhances Rupee Cost Averaging because you are buying more units over time as your investment amount increases, potentially capturing more market movements.

Question 18

Which is better: Step-up SIP or starting a new SIP?

Accepted Answer

Step-up SIP is more convenient as it's a single folio/instruction. Starting a new SIP every year creates multiple folios/entries to track, but offers more flexibility to choose different funds.

Question 19

Can I change the step-up frequency (e.g., every 6 months)?

Accepted Answer

Most platforms offer annual or semi-annual step-up options. You need to check the specific options available with your AMC or platform.

Question 20

How to calculate Step-up SIP returns manually?

Accepted Answer

It is complex to calculate manually as it involves a series of cash flows. It's best to use an online Step Up SIP Calculator (like this one) or Excel (using XIRR function).

Step Up SIP Calculator

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